The delay in repayment of loans to SMEs and small business owners affected by Corona 19 has been extended for six months until the end of September. A bank’s consultation counter. Hankyung DB
The Financial Services Commission announced on the 2nd that it would extend the mortgage repayment measures for SMEs and small business owners affected by the Corona 19 incident for another six months. Initially, it was scheduled to end at the end of this month, but it was decided to extend it until the end of September. Businesses who have a hard time paying off their loans can extend the maturity or postpone repayment of principal and interest if they apply by the end of September. This includes not only banks, but also loans and guarantees from two financial sectors and policy financial institutions. In a briefing, Dae-young Kwon, head of the Financial Industry Bureau of the Financial Services Commission, explained at a briefing, “We considered the fact that the prolonged Corona 19 crisis is causing difficulties for SMEs and small business owners, and the soundness indicators of domestic financial companies are good.” The mortgage repayment measures, which began in April of last year, were originally planned to be implemented for only six months, but were extended twice. The principal and interest deferred without repayment exceeds 130 trillion won.
‘Repay slowly as much as you can’
The Financial Services Commission came up with a’soft landing plan’ to prevent the burden of debt repayment from being concentrated after the grace period in October. The main point is that the borrower chooses the final repayment method and period by himself after consultation with the financial company. The Financial Services Commission introduced several examples of repayment methods that can be selected after the grace period ends.
For example, let’s say that A, a self-employed person who borrowed 60 million won at a fixed rate of 5% per annum and a temporary repayment condition, delays interest repayment for six months ahead of maturity one year. The interest delayed by Mr. A is 1.5 million won each month, 250,000 won.
How to pay off after the grace period ends
First of all, Mr. A has a method of doubling the monthly interest payment while leaving the maturity as it is. After the end of the grace period (6 months), for the remaining 6 months until maturity, you can repay 500,000 won per month by adding 250,000 won (1.5 million won ÷ 6 months) with the deferred interest on the existing interest 250,000 won. The principal of 60 million won is paid off at maturity. It is a good choice when you have relatively little money to flow. Financial institutions cannot accrue interest on interest that has been deferred to be repaid.
If this is a burden, the maturity can be extended by the period in which interest was deferred (6 months). After the end of the grace period, over a year, 250,000 won of the existing interest and 125,000 won of the postponed interest (1.5 million won ÷ 12 months) are added to pay 375,000 won per month. This way, the monthly interest payment is only 1.5 times the previous amount. However, as interest on the principal is added as the maturity is extended, it should be considered that the total interest owed by Mr. A increases by 1.5 million won (250,000 won x 6 months).
If this is too heavy, it is possible to extend the maturity by two years, much longer than the interest grace period. After the end of the grace period, for 2 years and 6 months, you can pay 300,000 won per month as interest, up to 50,000 won (1.5 million won ÷ 30 months) with the existing interest 250,000 won. If you choose this method, the monthly payment will be 1.2 times higher than before, and the total interest will increase by 6 million won (250,000 won x 24 months).
If it is difficult to repay even the interest of 300,000 won per month, you can choose to put a deferment period of about 6 months.
Fee waived even for early repayment
Even if the loan is received in an amortization method rather than a temporary repayment to maturity, the monthly repayment burden can be lowered. For example, if a person who deferred repayment of principal and interest for six months extends the maturity by up to three times (18 months), the amount of principal and interest repaid monthly is reduced to the lowest half level.
The Financial Services Commission explained that “these examples and other measures can be operated within the scope of complying with the five principles of soft landing support.” Financial companies advised the optimal repayment plan considering the situation of the borrower, and the borrower chose the final repayment method and period. Even if you pay off earlier than planned, you do not pay an interim repayment fee.
However, there is no clear standard for how far the bank should accept the borrower’s request for an extension of maturity. The Financial Services Commission said, “There is an opinion that the repayment period is appropriate for a maximum of two or three times the grace period.”
End of September? Or another extension?
According to the Financial Services Commission, by the end of January this year, the maturity extension was KRW 121,1602 billion (371065 cases), the deferment of principal repayment was 9,317 billion KRW (57,401 cases), and the delay in interest repayment was KRW 163.7 billion (13,219 cases). Came true. The banknote delinquency rate fell to an all-time low of 0.28% (end of December). It is an optical illusion effect caused by artificially delaying debt repayment. Not only the financial sector, but also the authorities agree that this measure, which is merely a temporary measure, cannot be continued.
However, the government did not respond clearly as to whether the loan repayment deferred measure would be “really terminated” at the end of September. Director Kwon also opened up the possibility of further extensions, saying, “It is a matter to be discussed with the financial sector in consideration of the quarantine and economic conditions comprehensively.”
The financial authorities said, “there is no obligation for financial companies to accumulate additional provisions for loans that are deferred for repayment, and it is okay to collect accrued interest as accounting interest.” When signs of insolvency were found, guidelines were issued to adjust individual soundness classifications and accumulate additional provisions.
Reporter Lim Hyun-woo [email protected]